Stocks

Buffet works up a big appetite in US stocks

Warren Buffett’s Berkshire Hathaway has found a great deal of value in the market correction after the Covid-19 pandemic-induced asset price bubble popped over the previous quarter. The conglomerate’s $41 billion net stock purchases during the quarter, after sitting out a two-year rally, are its biggest in 15 years and has pulled down its cash pile that had reached a record despite a vigorous share buyback programme.

Buffett has been complaining he is no longer sure of which stocks to buy in a frothy market. At its annual general meeting, which draws investors like a rock concert, Berkshire Hathaway last week disclosed big bets in oil and technology. The company also slowed down its share repurchases as money-making opportunities opened up. Berkshire Hathaway’s $51.1 billion gross stock purchases during the first three months of 2022 stack up against private equity firm Blackstone spending a record $65.8 billion to buy assets in the last three months of 2021.

The $26 billion holding in Chevron makes it one of Berkshire Hathaway’s top positions with Apple, Bank of America and American Express. Energy has been a standout winner over the quarter against an overall decline in the Standard and Poor’s (S&P) 500. Berkshire Hathaway now owns 9.5% of Activision Blizzard, which could be a merger arbitrage bet as Microsoft completes its takeover of the video gaming company.

In deal value, Buffett’s cumulative purchases over the quarter line up alongside the $69 billion Microsoft bid for Activision Blizzard, S&P Global’s acquisition of IHS Markit for $44 billion and Elon Musk’s offer of $44 billion for Twitter. Investors will read confidence about the US stock market in Berkshire Hathaway’s heightened activity. But its net income more than halved from the same quarter a year ago on mark-to-market investment losses, excluding which its operating earnings were marginally higher. The Berkshire Hathaway stock has also outrun the S&P 500.

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